East Capital’s Marcus Svedberg notes EBRD, IMF growth numbers

By: Marcus Svedberg | 26 Jan 2012

There were some notable country revisions but the EBRD did not change their outlook dramatically from their previous forecasts and the IMF does not deviate from market consensus, says Marcus Svedberg, chief economist at East Capital.

The EBRD revised down the 2012 growth for Eastern Europe with a marginal 0.1pp to 3.1%. The IMF revised down global growth from 4% to 3.3% but that was highly anticipated as the old forecast was out of date and the fund is now more in line with other institutions. Both organizations underline the downside risks but the fund still believes growth will accelerate to 3.9% in 2013, which is roughly the same as 2011.

The most notable changes in EBRD’s forecast were the 2pp and 1.6pp cut in the Hungarian and Slovenian growth forecasts. These countries, which are among the most integrated with the Eurozone, are expected to have falling GDP this year. The forecasts for Croatia, Bulgaria, Serbia and Ukraine were also cut by around 1pp, but growth is expected to remain in positive territory this year. This fits well with their general argument that it is the countries most integrated with the Eurozone that will slow down the most. On the positive side, growth revised up by 1-2pp for a number of the CIS economies. The forecasts for Russia and Turkey remained unchanged at 4.2% and 2.5% respectively. They also argue that inflation is not a problem in the region, with Turkey as a notable exception. The main threat to the region remains the Eurozone problems in general. They repeat the warning about deleveraging from Western European banks and point out that the region experienced net capital outflows in 3Q11 for the first time since 2009.

It was no surprise that the IMF wrote down the expectations for the Eurozone to -0.5% for 2012 as the previous 1.1% growth was unrealistic given all the budget cuts that were announced during the fall. They also revised down the growth for other developed economies with 1pp and for emerging markets with 0.7pp. DMs are now expected to grow a modest 1.2% in 2012 while EMs will grow 5.4%. Central Europe and the Baltics were revised down more than other EMs, due to proximity to and integration with the Eurozone, and IMF only think it will grow 1.1% or slightly less than the DM average this year. The CIS economies are expected to grow 3.8%. Both Russian and Chinese growth was revised down 0.8pp to 3.3%and 8.2% respectively, which is pretty much in line with what others are (gu)estimating.